As average vehicle CO2 emissions trend upwards in Europe, carmakers are looking to form 'pools' that can help avoid large fines under new tighter EU CO2 emission rules that come into force in 2021. Dave Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:

"Average CO2 emissions for new cars sold in Europe are now – after many years of falling – heading in the wrong direction. It is estimated that average CO2 emissions for new cars were around 159g/km in 2007 and that fell to 118g/km by 2017. But in 2018 it was up to 120g/km. The EU target is to be at a somewhat difficult looking industry-wide figure of 95g/km in 2021. Car companies above their individual targets will face large fines.

"The basic problem is that diesel technology has been at the heart of the European car industry's CO2 improvement over the last decade, but diesel share of the car market in Europe has fallen substantially as diesel has fallen out of favour. In the UK, for example, diesel share of the new car market is down to 27% so far this year – it was 50% in 2015. A shift in the market towards SUVs is another headwind to improving average fleet fuel efficiency and lowering CO2 emissions.

"The tough targets mean car manufacturers are faced with having to accelerate investments in – expensive – electrification technologies, but that alone won't be enough for all. There is little doubt that some will miss their individual targets and potentially face fines of hundreds of millions of euros imposed by the European Commission.

"However, under EU rules, carmakers can set up 'open pools' to combine their vehicle fleets for average CO2 measurement. A European Commission report shows declarations of intent to do that from Fiat-Chrysler (FCA) and Tesla. There is also another one between Toyota and Mazda.

"As the time horizon to 95g/km shortens, other companies are sure to consider pooling as a strategy for avoiding large fines – the sum FCA may be paying Tesla for the pooling privilege has not been disclosed. It is not surprising that zero-emissions Tesla is alert to the revenue raising pooling opportunity emerging in Europe. It has also made money trading zero-emission credits in the US in the past."